How Are Payday Loans Different From Instalment Loans?

Tue, 20 Nov 2018 by Aidan Daniels

There are a lot of different kinds of loans offered in the financial market today. The broadest umbrella that differentiates among them in the simplest manner is their terms. A loan will either be a long-term or a short-term. Either way, the terms tend to be quite complicated. Above all that, it also takes a bit of time before you get the loan granted.

What if you just want a couple of pounds to take care of certain expense by the end of the month? Going on to get regular loans for this is an effort not worth it. This is where you can make use of one of the more contemporary forms of loans: the payday loans. These loans offer some of the simplest and the easiest ways to cater to your month-end financial emergencies.

A lot of people tend to confuse payday loans with Instalments loans. Since this is quite a common misconception, we have defined traits of both and elaborated each of the loans to shed light upon their differences.

By Definition

Payday loans: This is a short-term loan that a person can borrow for a fairly high interest rate. The borrower has to write a post-dated cheque in the name of the lender in exchange for cash up front. The loans granted in payday loans are typically capped at a little over a thousand pounds. Some payday loan providers also put a minimum limit over your grants.

Instalment loan: They are granted for more or less the same period payday loans are. However, they’re quite a bit different. An instalment loan is repaid in several scheduled monthly payments. While payday loans are only a simple cash advance, instalment loans can include auto loans and mortgages etc.

Repayment Schedules

Payday loans: These loans normally have a lower limit of 80 pounds while the maximum limit on an average is 1000-1200 pounds. Payday loans are typically required to be returned within a month’s period, or right after your payday. It is of utmost importance that you pay the existing loan amount in time order to be able eligible to get another payday loan.

Instalment loans: When it comes to instalment loans, there are several monthly payments involved. Lenders and borrowers tend to work together to ensure that the monthly payments are realistic and easy for the borrower to manage. Every single payment reduces a portion of your principle as well as a portion of interest on it.

Approvals

Payday loans: This is one of the key areas where payday loans tend to stand out as being one of the easiest and simplest to opt for. To start off, since the loan amount is not a very big one, no credit check is required to get it. However, if you fail to payback the loans in addition to the principal payment on time—if the cheque bounces—the already high interest rate over your principal will be increased. If you know that you will not be able to pay back the payday loan on time, you have the option to do that for a considerable charge.

Instalment loans: As with most other loans, if you have a bad credit, there are chances your lender will turn you down. However, with the use of detailed budget formulas, lenders may ensure repayment and therefore grant you the loan in the first place. In addition to that, lenders here also ensure your ability to pay the loan back, even if your credit history is good.

When to Opt For a Payday Loan?

People often ask about the right time of opting for a payday loan. Well, the core purpose of payday loans is to offer quick financial help where you require small but urgent cash. This makes payday loans perfect for unexpected circumstances like a car repair that might arise by the end of the month, or certain bill that you did not expect. In a nutshell, payday loans can be opted for any financial emergency that requires quick and relatively smaller amounts of cash.

The instalment loan, on the other hand, tends to offer loans with a bit more complications. They are usually meant for certain bigger financial needs like assistance in mortgage etc.

Let us go through the some of the major pros and cons of Payday and instalment loans in order to better grasp the idea how both of them differ.

Benefits

Payday loans:

Among the greatest benefits of payday loans is that they are very easy to obtain. This is a prime reason why people go for them to cater to their quick financial needs.- They offer a great amount of convenience. There are several different financial companies that offer payday loans.- Since the terms for the grant of payday loans are very lenient, everyone can opt for it regardless of their credit standings.

Instalment Loans:

Among the prime benefits of instalment loans is that they allow you to enjoy pre-decided payments throughout the payback period. Since the payments are fixed and certain, you know exactly what you need to save from your paycheque.- Although not the fastest, but you can get the money from instalment loans within a few days.

Are Payday Loans Better?

Payday loans tend to be a fairly better option especially if you need just a small amount to cater to your needs. In addition to that, it only takes about a month to pay back the entire amount with interest. This takes the burden off your chest in a short period. Also, the payment of these loans can be rolled over to the next month if you are not being able to pay it in the current one. However, an additional fee is charged for this roll-over.

There are a lot of companies in the UK that offer payday loans. If you are confused which one to go for, simply head over to Quiddi Compare and evaluate the offerings of several different financial institutions to choose the one that best suits your requirements.

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